review of operations hong kong property leasing

Hang Lung Properties Limited42

Review of Operations

Despite a slower economic growth and sliding retail sales, revenue and operating profit of our Hong Kong leasing portfolio increased 5% and 7% to HK$3,742 million and HK$3,196 million, respectively. Overall rental margin was 85%.

The Hong Kong commercial portfolio achieved a 9% rental growth to HK$2,255 million as

the benefits of completed asset enhancement programs continued to flow through. Overall

occupancy by the end of 2016 was 96%.

The Hong Kong office portfolio recorded a stable rental growth of 2% to HK$1,199 million, mainly

contributed by positive rental reversions.

Revenue of residential and serviced apartments decreased 8% to HK$288 million due to lower

occupancy rates.

Hong Kong Property Leasing

2012 2013 2014 2015 2016

Residential and Serviced Apartments

Of�ce and Industrial/Of�ce

Commercial

HK$ Million

HK$3,742Million

REVENUE OF HONG KONG PORTFOLIO

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2016 Annual Report 43

SEgMENTal aNalySiS OF hONg KONg iNvESTMENT PROPERTiESFor the year ended December 31

Rental Revenue(hK$ Million)

Occupancy Rate(at year-end)(%)

2016 2015 2016 2015

Commercial 2,255 2,072 96% 98%

Office and Industrial/Office 1,199 1,171 91% 95%

Residential and Serviced Apartments 288 314 76% 75%

Total 3,742 3,557 91% 94%

gEOgRaPhiCal aNalySiS OF hONg KONg iNvESTMENT PROPERTiESAt December 31

Total gross Floor area* (‘000 sq.m.)

2016 2015

hong Kong island

Central 51 51

Causeway Bay and Wan Chai 92 92

Kornhill and Quarry Bay 134 134

The Peak and Mid-Levels 46 46

Hong Kong South 12 12

Kowloon

Mongkok 140 140

Tsim Sha Tsui and West Kowloon 86 86

Ngau Tau Kok 76 76

Kwai Chung 9 9

Total 646 646

* Including gross floor area of car parks

The performance of our commercial leasing portfolio is set against the backdrop of declining

tourist arrivals which, though the numbers stabilized as the year progressed, nonetheless affected

retail sales, particularly in fashion and high-end jewelry and watches. Retailer sentiment has been

cautious and international brands have retreated or rationalized their operations, making the

leasing environment disadvantageous for lease renewals and new lettings.

Office leasing has also been impacted by the conservative approach taken by office occupiers

such as budget tightening measures and increased cost sensitivity, which have had a direct

impact on demand in the sector. There is also a spill-over effect on residential leasing.




haNg luNg CENTRECauseway bay

FaShiON walKCauseway bay

bRiEF ON MaJOR PROPERTiES

gross floor area (sq.m.)

Commercial

Office


Number of car parking spaces

Occupancy rate (at year-end)

Commercial

Office


Number of shopping mall tenants

Fashion & Accessories

Food & Beverage

Leisure & Entertainment

Bank

Department Store

Others

In a unique fusion of indoor and outdoor elements at the heart of Causeway Bay and encompassing four vibrant streets – Great George, Paterson, Kingston and Cleveland – Fashion Walk is the superlative shopping destination, offering the latest trends in fashion, gastronomy and lifestyle in a magnificent setting. In addition, Fashion Walk features an exciting collection of restaurants with al fresco and indoor seating.

50%

22%

9%

19%

31,072

N/A

7,935

N/A

100%

N/A

87%

79

Conveniently located in the heart of Causeway Bay, Hang Lung Centre is a retail and commercial complex with key retail and semi-retail offerings in travel, fashion wholesale and medical services. The opening of H&M’s first and largest global flagship store in Asia in 2015 injects new energy and boosts the shopping ambience.

Expansion of the travel zone creates a comfortable environment for customers obtaining travel information and shopping for travel products.

80%

20%

8,777

22,131

N/A

126

100%

91%

N/A

3

Key Statistics

Commercial Segment Distribution (by leased Floor area)



ThE PEaK gallERiaThe Peak

KORNhill PlazaQuarry bay

Located at Hong Kong’s top visitor attraction, The Peak Galleria is a shopping and dining complex. It not only features a full array of local and international specialty stores, restaurants and a 3D illusion art museum but also a host of environmentally friendly facilities. Its Observation Deck at Green Terrace on L3, offering the stunning panoramic view of Victoria Harbor and the Pok Fu Lam Reservoir, is a must-visit place.

22%18%

7%

23% 30%

12,446

N/A

N/A

493

81%

N/A

N/A

41

Conveniently located on top of the MTR Taikoo Station, Kornhill Plaza is one of the most popular shopping hubs on East Hong Kong Island. The commercial complex houses a quality lifestyle shopping arcade, department store, serviced apartments with superior management and services, an office tower and the Kornhill Learnscape education center.

2% 18%

11%

15%

54%

53,080

10,577

35,275

1,069

100%

98%

65%

112






bRiEF ON MaJOR PROPERTiES

Home to Hang Lung’s headquarters, the Standard Chartered Bank Building is a prestigious Grade A commercial tower in Central district. It is also the home of the first digital branch of Standard Chartered Bank, the luxury fashion brand Escada and the high-end Chinese restaurant Mott 32.

15%

56%

29%

4,814

23,730

N/A

16

100%

100%

N/A

3

Located on bustling Nathan Road next to the MTR Mongkok Station, Grand Plaza comprises two office towers and a commercial podium with high-standard facilities. It houses renowned watch and jewelry brands, many fashion brands and restaurants targeting both locals and tourists, as well as beauty and medical centers.

16%

13%

60%

11%

20,905

31,251

N/A

40

69%

90%

N/A

26

gross floor area (sq.m.)

Commercial

Office


Number of car parking spaces

Occupancy rate (at year-end)

Commercial

Office


Number of shopping mall tenants

Key Statistics

gRaND PlazaMongkok

Standard Chartered Bank BuildingCentral



Fashion & Accessories

Food & Beverage

Leisure & Entertainment

Bank

Department Store

Others


Conveniently located near the MTR Kowloon Bay Station, Amoy Plaza is an integrated mall in Kowloon East, comprising stores offering trendy fashions, beauty products and electronic gadgets. Together with more than 35 restaurants serving local and international cuisines, the mall offers a full selection of lifestyle experiences for nearby office workers and residents of Amoy Gardens.

16%28%

25%

31%

49,006

N/A

N/A

620

97%

N/A

N/A

252

Located in the vibrant Mongkok district, Gala Place houses the largest single-story Starbucks in Hong Kong, spanning over 4,500 square feet, as well as the triple-story H&M full-concept flagship store, the largest H&M store in Kowloon, and has become a hotspot for the trendy and fashionable. Park-In Commercial Centre houses a potpourri of diversified services and products including outdoor gear, chic fashion, skincare and cosmetics, lifestyle products, audio and digital gadgets, as well as beauty and fitness centers. Park-In Commercial Centre Carpark offers nearly 500 parking spaces, providing a convenient, one-stop shopping experience for its customers.

92%

8%

7,454

30,205

N/A

478

100%

85%

N/A

2

aMOy PlazaNgau Tau Kok

gala PlaCe & Park-in CommerCial CentreMongkok






FaShiON walKSpanning four dynamic streets in the heart of Causeway Bay, Fashion Walk has, through its

recent renovation, re-established itself as a one-of-a-kind community providing a rich source

of creative inspiration for fashion and living with style. With a multitude of the world’s leading

designer labels, and a diverse line-up of exciting food and retail options, the Fashion Walk

neighborhood has become more sophisticated, with a vibe of its own that never ceases to

energize and inspire. Through the year in review, Fashion Walk has enhanced customer

experience with the addition of an impressive array of cutting edge brands

including Fjallraven, Sandro, Maje, Y’s, ZUCCa and Reebok, along with

a new adidas flagship store. The grand opening of Lady M New York in

Fashion Walk’s adjacent al fresco dining hub has further enhanced Food

Street’s reputation as the premier choice for fashionable refreshment.

Pop-up stores have been leveraged throughout the year to provide exciting

new twists to our retail mix and stimulate public interest in trending concepts

and merchandise. Participants include Chanel’s ROUGE COCO ON TOUR

world music tour, Moet & Chandon’s Ice Imperial Pop Up Lounge, Baume &

Mercier’s Capeland Shelby Cobra Pop-up Store, Kiehl’s Nature Mix Market,

and Maxim’s Mooncake Pop-up Store.

Year-round marketing events are launched to engage and delight our

customers. Fashion Walk deservedly gained global recognition with

prestigious awards such as a bronze Cannes Lion, the ICSC Awards, and

the Marketing Events Awards. These honors have solidified Fashion Walk’s

stature as the leading destination for fashion and lifestyle shopping in the

territory, and further strengthened its brand value.

Fashion Walk has re-established itself as a one-of-a-kind community providing a rich source of creative inspiration for fashion and living with style


CENTRal PORTFOliOComprising the Standard Chartered Bank Building, 1 Duddell Street, Printing House, and

Baskerville House, our Central office portfolio has continued to deliver stable rental growth during

the year in review.

ThE PEaK gallERiaThe Peak Galleria achieved an occupancy rate of 100% in the first half of 2016. This was a

considerable feat in the challenging retail environment associated with the drop in tourist arrivals

and at a time when the mall is preparing for a comprehensive, phased renovation program

commencing in the 1st quarter of 2017.

Fashion Walk’s adjacent al fresco dining hub has further enhanced Food Street’s reputation as the premier choice for fashionable refreshment




KORNhill PlazaThe mall’s satisfactory performance for the year under review is largely based on a tenant mix

that is ideally suited to the property’s location. The general retail downtrend has had a lesser

impact on consumer goods, groceries, and everyday food outlets. The tenant mix for Kornhill

Plaza underwent a significant upgrade exercise in 2016, with the addition of 23 new retail brands

and six restaurants.

Of the new introductions, eight are making their debut in the Hong Kong East district. The mall

also features a new beauty section with the debut of the 10,000-square-foot Glam Beautique.

Anchor tenant AEON department store completed a total upgrade of its facilities and in July

2016 launched the first AEON STYLE lifestyle department store outside Japan. Another major

remodeling saw the upgrade of the existing ParknShop supermarket to the more upscale brand,

Fusion. A further upgrade is underway at the MCL cinema, which is expected to reopen in April

2017 under the premium brand, Grand Kornhill Cinema, complete with Hong Kong’s first MX4D

technology-enabled movie experience.

Supporting the mall’s positive growth during the year under review has been a program of

marketing events and activities including the Paul Frank X KP Chinese New Year event, which

included themed decorations, pop-up stores, and the redemption of New Year red packets.

Leveraging on this success, the team

intends to develop a unique signature

event for the mall in the coming year

to boost brand image and engage the

public with the mall’s diverse tenant

offerings.

Kornhill Plaza has undergone a significant upgrade exercise in 2016


MONgKOK PORTFOliO – ShOPPiNg MallThe development of a beauty hub at Grand Plaza and improvements made to advertising signage

to improve the shopping ambiance helped to drive sales revenue. Meanwhile, the transformation

of the second floor of the mall from retail shops to a diverse range of food and beverage outlets not

only broadened our food offering and established Grand Plaza as a fashionable dining destination,

but also helped to draw more traffic to the mall’s upper zone.

The synergy between the properties in our Mongkok portfolio also amplified brand visibility as

international labels established a succession of new flagship and concept stores at Grand Plaza,

Gala Place, and Hollywood Plaza. The opening of H&M at Gala Place and 6ixty8ight at Hollywood

Plaza has demonstrated this bonding effect. Hence we not only strengthened our position as a

fashion retail hub but also provided a much needed engine for rental growth. These advances

made in the course of 2016 set a firm foundation for sustained growth in the coming year.

Plans are also underway for the promotion of food and beverage brands within the mall through a

series of O2O programs to engage fans with offers of dining coupons. The tenant mix will undergo

further refinement in the coming year, with five to six restaurants expected to open their doors

during 2017, including ClubONE, a renowned restaurant focusing on wedding banquets and

event catering. These, together with a focus on kids’ lifestyle retail and services, will provide a

basis for sustained growth opportunities for Kornhill Plaza in 2017.

Pop-up features and marketing events at our Mongkok portfolio drive footfall and income, as well as bringing increased excitement to the district




Branding the area as the place Where We Meet Trends will create opportunities for

cross-mall synergy as well as talking points that will boost footfall. Strengthening tenant

engagement, our teams intend to work with our brand partners to create more limited edition

products and promote a “flagship hopping” concept to attract footfall from target segments of the

community. These measures will establish Hang Lung’s Mongkok portfolio as the preferred social

hub among young adults.

After completion of the asset enhancement, we groomed Gala Place as a renowned place of

happenings during the year. Events such as pop-up features and marketing activities drove

footfall and income, as well as bringing increased excitement to the district. Later in the year, the

craft beer festival and Halloween party generated a buzz in the media with encouraging coverage

in both local and international media. Although the general economic climate presents further

challenges, we shall sustain our growth trajectory with the team’s focus on presenting more

pop-up features in the coming year to continue the coordinated campaign to draw customers.

MONgKOK PORTFOliO – OFFiCE TOwERS The general economic climate inevitably subdued

the performance at the office towers with a reduced

occupancy rate and shrinking demand. To increase

our competitive edge and enhance the customer and

tenant experience, enhancement and upgrading works

have been undertaken to renovate the common areas.

In addition, the trade mix has also been enhanced and

broadened to recruit more diversified trade floors in the

office portfolio.

In order to enhance the pull factors to retain existing

tenants and to attract quality new ones, we are

pioneering the roll-out of complimentary IT supporting

services to most of our office towers in 2016. Such

value-added service for our office tenants is very well

received, with most common IT problems such as

internet disconnection, printing job failures and email

transmission problems now solved by our frontline staff.

The value-added IT supporting service is well-received by our office tenants


aMOy PlazaSatisfactory growth of 5.1% was recorded at Amoy Plaza despite economic headwinds. Growth

at the mall has been supported by local consumption from the Kowloon Bay business district

and the local residential areas, along with effective marketing campaigns and an enhanced

tenant mix.

Amoy Plaza has undertaken a tenant mix reshuffle including the introduction of Tai Hing Group’s

three-in-one concept store (comprising Tai Hing, Teawood, and Trusty Congree King), Aroi Thai,

and other new restaurants that have achieved higher sales turnover.

In the retail sector, fashion brands Ray-Ban and Skechers opened their first Hong Kong concept

stores at the mall, and the consolidation of the mall’s Healthcare and Beauty and Leisure and

Lifestyle zones has seen the addition of new high-profile brands such as Fortress, CD Warehouse,

and Joint Publishing.

In terms of enhancing our physical capacities, small shop lots have been combined into larger

ones to attract chain stores which can help to provide a more stable rental revenue stream.

In light of the potential addition of a footbridge from the East Kowloon Culture Centre to Amoy

Plaza, feasibility studies have been initiated to assess possible equipment and utilities upgrades.

Whilst the coming year presents its challenges, Amoy Plaza is in an excellent position to maintain

its position in the market as an attractive one-stop shopping, dining, entertainment, and lifestyle

hub servicing the Kowloon East district with over 250 retail outlets and more than 40 specialty

restaurants. We are targeting a further upgrading of our food and beverage offering along with the

addition of a new cinema operator.

With the maturing of Kowloon Bay as a commercial and business hub and the future new

development of the East Kowloon Cultural Centre (expected to be completed in 2020), the district

is projected to flourish with Amoy Plaza at its center.

Growth at Amoy Plaza has been supported by local consumption along with effective marketing campaigns and an enhanced tenant mix

review of operations hong kong property leasing

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